China’s One Belt One Road (OBOR) initiative, the grand program that President Xi hopes will be his lasting legacy in creating the world’s largest economic collaboration platform, has attracted the interest so far of 68 countries with combined GDP of US$23 trillion. Yangtze River Development (Nasdaq: YERR), with its critically located Wuhan Newport Logistics Center, remains well positioned to reap the benefits of the increase in cross-border shipping and trade.
While much has been made, and rightfully so, of how much China is committing domestically to developing OBOR, China’s direct investments in Asian and other countries may prove to be equally important – if not in magnitude of renminbi, certainly in strategic value – to the OBOR initiative. By investing in these OBOR countries, China appears to be laying the groundwork for the premier economic supply chain across Asia and Europe.
China’s Foreign Direct Investment
According to Reuters, Chinese acquisitions in companies located in the 68 OBOR countries totaled $33 billion in just the first eight months of 2017, and it’s instructive to examine the nature of these investments versus other investments by China in non-OBOR countries.
China’s investments in Latin America, Africa, Australia and Canada continue to be dominated by natural resource extraction and other energy-related activities, according to the Center for Strategic and International Studies. In fact, over 70% of all Chinese construction contracts in Latin America and the Caribbean since 2010 have been in the energy sector.
In contrast, Chinese investment in the OBOR regions in Asia and Europe, while still showing high concentrations in energy, have in recent years been gradually diversified into key infrastructure segments including transportation, real estate, technology and tourism. Among the cornerstones of this movement was the US$1.6 billion investment in Gwadar, a key Arabian Sea port in Pakistan, by China’s Overseas Port Holdings in 2013.
Source: CPEC News
Gwadar was the first foreign port investment as part of OBOR and is the endpoint of the China-Pakistan Economic Corridor (CPEC), a key leg of OBOR. According to The Express Tribune, China’s investment in Pakistan under CPEC was US$62 billion as of April 2017, with more than half of the amount earmarked for electricity production and distribution. China has become the largest source of foreign direct investment into Pakistan, according to Fortune, and CPEC-related “infrastructure splurge has helped revive Pakistan’s sputtering economy.”
Source: Hong Kong Trade Development Council
Yangtze River Development – In the Heart of the Hubei Free Trade Zone
Yangtze River Development’s key infrastructure development project is located in Wuhan, the capital of Hubei province in central China and one of the central nodes of the OBOR initiative. Hubei is one of the 11 Free Trade Zones (FTZs, known as Foreign Trade Zones in the United States) that China began to roll out in 2013, beginning with Shanghai. FTZs are specially designated economic zones in which goods may be landed, handled, manufactured, reconfigured and reexported without the intervention of the customs authorities, according to the General Office of Hubei Provincial People’s Government. Only when the goods are finally moved to consumers within the country where the zone is located do they become subject to the prevailing customs duties.
Wuhan is a crucial trading site that will be a lynchpin of OBOR once fully developed. Upon completion, Yangtze River Development’s Logistics Center, occupying over 1.9 million square meters, will encompass port operations, warehouse and distribution, cold chain logistics, rail cargo loading and exhibition areas. Wuhan will provide businesses and their goods with direct access to the Hubei Free Trade Zone, from which the Yangtze River, the Wuhan-Xinjiang-Europe freight railway and highways will carry their goods to end consumers throughout China, the rest of Asia and Europe.
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